Abstract:  In this talk, we study the problem of reducing carbon emissions by a set of firms over a finite time horizon. Firms can trade emission allowances in order to minimize the total expected costs arising from abatement and trading, together with a terminal quadratic penalty. In addition, they can choose the type of energy—fossil or green—used in production, thereby maximizing production profits. Using mean-field game theory as a mathematical framework, we investigate how different forms of market competition may affect the energy transition.

This is joint work with Giulia Livieri (LSE) and Gianmarco Del Sarto (TU Darmstadt).